Secretary-General

21st Century Multilateralism: the OECD in a G20 World

Remarks by Angel Gurría, OECD Secretary-General, delivered at the Centre for Global Development

24 March 2011, Washington D.C.

Dear Nancy, Ladies and Gentlemen,

It is my great pleasure to be here, at the Centre for Global Development, together with my dear friend and colleague Nancy Birdsall. Being a member of the Board of the CGD is a badge of honor I wear with great pride.

Nancy is not only a friend and one of my heroes, she is also a regular of the OECD, where she visited only last year to give a fascinating presentation on the Cash on Delivery Aid approach developed by the Centre.
Allow me to focus on a critical issue for our Organisation: its role in the new international architecture. This is also a great opportunity to discuss some of our perspectives on the new architecture of global governance more generally.

“Shifting wealth” in the world economy

Global development perspectives have been changing rapidly in recent years. The centre of economic gravity is moving from the advanced to the large emerging economies, particularly Brazil, China and India. This is what we call ‘Shifting Wealth’. And this also means substantial improvements in growth, poverty reduction and inequality in the developing world.

The pace of change in recent years has been so rapid, that the world economy today is barely recognisable from that of fifty years ago when OECD countries accounted for some 80% of global GDP. Today the share has fallen to about 60 %. At the same time emerging and developing countries already account for more than one fifth of global trade and our forecasts anticipate that they will account for nearly 60% of world GDP by 2030.

Developing economies are faced with new opportunities in this new economic geography. We used to think that countries progressed by building up their technological capacity in the manufacture of relatively simple commodities (toys, textiles, etc), and slowly upgrading towards more sophisticated goods. Today, we know that different development paths are possible.

The enormous untapped potential in South-South flows of trade, aid and investment, which countries can use for development, is a new feature of the global economy. Let me give you a few examples:

In 2009 China became the leading trade partner of Brazil, India and South Africa.

The Indian multinational Tata is the second most active investor in sub-Saharan Africa.

Emerging economies now give over 100 times more aid to developing countries than they did in 1990, to reach about 15 percent of the flows of OECD-DAC donors.

One of the positive consequences of rapid growth in China, India and elsewhere is poverty reduction. Since 1990, the number of people in the world living in extreme poverty, on less than a dollar-a-day, has fallen by more than a quarter – approximately half a billion. The problem is that about 90% of these people were in China. Thus, the challenge is to better spread the benefits of this “shifting wealth.”

The record of poverty reduction in the rest of the developing world is more mixed, and the Millennium Development Goal of halving poverty by 2015 is still some way off. Moreover, inequality is increasing in many of the high-growth developing economies.

Growth alone is clearly not enough. For emerging economies, the good news is that thanks to their new-found wealth and prosperity, governments can afford to boost public spending on social protection, including welfare assistance, to reduce inequality. For developing countries we have to go more than the proverbial extra mile and here the G20 and other sources of cooperation between advanced, emerging and developing economies can help.

New economic realities reflected in a new architecture of global governance

What do these new economic realities mean for the global governance architecture, international cooperation and 21st century multilateralism?

The shift in the centre of economic gravity that we discussed above has to be reflected in the global governance architecture. Thus, the new players have to be given a stronger voice in decision-making and multilateralism has to evolve further in a more inclusive manner.

The financial crisis has reinforced the need for intensified international co-operation between advanced, emerging and developing economies. The strong, effective and coordinated crisis response of the G20 Leaders was unprecedented.

The transformation of the G20 into the “premier forum for international economic cooperation”, endorsed at the Pittsburgh Summit, is a welcome consequence of this trend. Sitting at the G20 table as equals, none as guests, the leaders of the countries at the heart of the “Shifting Wealth” story are getting together to define common solutions to common challenges. This nascent rebalancing of voice and power is reflected, among other examples, decision to reform the International Financial Institutions’ voting quotas and in the newly approved selection process of their top management.

But, the G20 is not only about rebalancing decision-making. It deals with a large spectrum of issues, and above all, provides a framework for enhanced policy coordination. That is where the OECD comes in. We engage and support the G20:

on the adoption of structural policies within the Framework for strong, sustainable and balanced growth;

on policies for employment, skills and jobs;

on polices to liberalize trade, investment and capital flows;

on the promotion and adoption of our standards for anti-bribery;

on the abolishment of fossil fuels subsidies;

on policies for efficient, fair and transparent taxation systems;

on food security and commodity markets;

and on the Seoul Consensus for Development and its Multi-Year-Action Plan.

To deliver on its ambitious policy agenda, the G20 should be equipped with a mechanism for candid and systematic policy sharing, and a mechanism for monitoring commitments. This is an important prerequisite for success in crafting consensus in a large and heterogeneous arena. The risk is to reach such consensus by converging towards the lowest common denominator, instead of adopting ambitious and high quality standards.

We are collaborating closely with the French presidency of the G20 this year to support the design and implementation of such mechanisms.

The role of the OECD in the new architecture of global governance

The OECD is supporting the emergence of the new architecture of global governance in many ways, beyond its contribution to the G20.

Since 1961, the OECD has performed its role as policy advisor and pathfinder for member and partner countries. Evidence-based policy advice, such as our Jobs Strategy, our PISA education test now covering around 70 countries, or our economic country studies, including the BRIICS and the Euro Zone, have helped policy makers and stakeholders to pursue their reform agendas. Our pioneering work on the economics of climate change and the use of economic instruments to achieve environmental goals provide useful tools to bring “green” and “growth” together.

Over the past five decades the OECD has earned its credentials as a global “standard setter”. Our Guidelines for Multinational Enterprises, our Global Forum on Transparency and Information Exchange for Tax Purposes, our Anti-bribery Convention and our mechanisms for monitoring aid flows are just a few examples of the ways in which we help to develop high international standards of public policy.

Our strategy to serve as an important pillar in the new architecture of global governance includes three dimensions: openness, impact and inclusion.

Last year, Chile, Estonia, Israel and Slovenia became members of the OECD and accession talks with Russia are advancing. We are also designing innovative arrangements to engage with our member and partner countries in developing better policies and finding common responses to global challenges. We are striving to strengthen our impact by reinforcing our relations with key emerging economies, in particular Brazil, China, India, Indonesia and South Africa (our “Enhanced Engagement” partners).

We need to show that there is a clear value-added of multilateral cooperation vis-à-vis unilateral action. And here the OECD can offer know-how, tools and recommendations. This is our role and our responsibility.

Ladies and Gentlemen:
This year, the OECD is celebrating its 50th anniversary. In our first five decades, we have proven that international co-operation between countries with different visions induces policy convergence or at least reduces the level of friction and thus allows for more ambitious accomplishments to raise the quality of life among the peoples of the world.

Building a new architecture of global governance takes time; it is a journey, not a destination. And we are here to help leaders navigate this journey and adopt “better policies for better lives.”
Thank you.